Franklin Templeton to buy Alcentra from BNY

The acquisition, valued at $700m, will double the US manager’s private credit assets under management.

Franklin Templeton has agreed to buy BNY Alcentra Group Holdings from Bank of New York Mellon in a deal that will double the global assets under management of Franklin Templeton’s private credit arm, Benefit Street Partners, to $77 billion.

The transaction, which is expected to close in the first quarter of 2023, is valued at $700 million, the companies said in a statement. That includes $350 million at closing and as much as $350 million more based on performance targets over the next four years. Franklin Templeton also will purchase BNY’s Alcentra-related seed capital investments, which were valued at $305 million as of 31 March 2022. Those assets will be valued at closing to determine the purchase price. The acquisition will be funded from Franklin Templeton’s existing balance sheet resources and is expected to be “immediately accretive” to the firm’s adjusted earnings per share, the statement said.

Alcentra is one of the largest European credit and private debt managers, with $38 billion in AUM and global expertise in senior secured loans, high-yield bonds, private credit, structured credit, special situations and multi-strategy credit strategies. Although Alcentra’s 2018-vintage European direct lending fund closed on €5.5 billion, significantly exceeding its €3 billion target, the manager has since struggled to hit its funding targets, according to Private Debt Investor R&A.

The acquisition will allow Benefit Street to expand its alternative credit capabilities and assets in Europe and will continue to strengthen the breadth and scale of Franklin Templeton’s alternative asset strategies. The deal will bring firmwide alternative assets under management to $257 billion.

The Alcentra acquisition is “an important aspect of our alternative asset strategy – the expansion into alternative European credit”, Jenny Johnson, president and chief executive officer of Franklin Templeton, said in the statement. She added that alternative investments represent “a significant diversification tool” that is increasingly important for the firm’s individual and institutional investors. The acquisition expands the firm’s long-standing relationship with BNY Mellon, she said.

“We believe the addition of Alcentra will elevate Franklin Templeton and BSP to a leading position in global alternative credit,” said Tom Gahan, CEO of Benefit Street and head of Franklin Templeton Alternatives. He noted that Alcentra is “highly complementary” to BSP’s existing US capabilities, with no overlap in Europe.

Hanneke Smith, CEO of BNY Mellon Investment Management, said the firm would continue to offer Alcentra’s capabilities in BNY Mellon’s sub-advised funds and in select regions via its global distribution platform, and that BNY Mellon would provide Alcentra with continuing asset servicing support. At close, BNY Mellon expects the transaction to increase BNY Mellon’s Common Equity Tier 1 capital by approximately $500 million.

Jon DeSimone, CEO of London-headquartered Alcentra, said that BNY Mellon has contributed significantly to the firm’s growth, with assets under management doubling since 2014. The combination, he said, will enable the manager to “collectively provide clients with solutions across the credit spectrum”.

Franklin Resources, parent of Franklin Templeton, is a global investment manager with approximately $1.5 trillion in assets under management as of 30 April 2022. Its subsidiary, New York-based Benefit Street Partners, is a credit-focused alternative asset manager with approximately $39 billion in AUM as of 31 March 2022. BSP manages assets across a broad range of complementary credit strategies.

BNY Mellon is a global investments company with $45.5 trillion in assets under custody and/or administration and $2.3 trillion of AUM as of 31 March 2022.